Economics on software flaws

Nov 2013
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Q] Suppose that a large software company, Software Monopoly, or SM, is about to release a new software product called Doors, affectionately known as SM-Doors. The software for Doors is estimated to have 1,000,000 security flaws. It is also estimated that each security flaw that remains in the software upon release will cost SM about $20, due to lost sales resulting from damage to its reputation. SM pays its developers $100 per hour during the alpha testing phase, and at this phase, developers find flaws at a rate of about 1 flaw for every 10 hours of testing. In effect, customers act as beta testers when they find additional flaws in Doors. Suppose that SM charges $500 per copy of Doors and the estimated market for Doors is about 2,000,000 units. What is the optimal amount of alpha testing for SM to conduct?

Q] Assuming that developers find flaws at a rate of N/100,000 per hour of testing, where N is the number of flaws remaining in the software, and all other parameters are the same as in above problem. Note that this implies it is more difficult for developers to find flaws as the number of flaws decreases. What is the optimal amount of alpha testing?
 

Denis

Math Team
Oct 2011
14,592
1,026
Ottawa Ontario, Canada
ramlakhan said:
The software for Doors is estimated to have 1,000,000 security flaws.
Well, better than Windows :idea:
 
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